Tuesday, December 6, 2011

I'm seeing people in the blogosphere react to this "Hayek didn't really influence macroeconomics" thing by citing modern macroeconomists' appreciation for the complexity of the economy and the importance of the price system and of essentially microeconomic insights for macroeconomics.

OK... so? Look, this has been a standard insight for economists since Adam Smith if you follow the canon, and since well before Smith if you want to go farther back. You can't attribute every Smithian bone in the modern economists' body to Hayek.

Keynes presented a system that ran completely differently than the previous orthodox system. It was, almost necessarily, general. He was introducing a new framework after all. And over time, complexities were added and caveats are made. That's natural and it's hardly a turn from the insights of the General Theory, unless you're seriously arguing in favor of putting Smith in a boxing match with Keynes now just like you put Hayek in a boxing match with Keynes.

The question is this: if Hayek had never been around after 1933 or so - or if he had just never been around at all - would modern macroeonomics look much different than what it is today? It seems to me the obvious answer is "no". If Keynes had never been around macroeconomics would look so different one has trouble even speculating what we'd be talking about today.

And to repeat - this is nothing against Hayek. It's just a read of the history of what actually happened. As I said in the last post, I think the caricatures of Hayek that you see today really limit him.

7 comments:

People also seem to be crediting Hayek with a lot of the stuff Milton Friedman brought to economics. I mean, I dunno to what extent Friedman was influenced by Hayek, but it was Friedman's towering intellect in that pushed these ideas into the mainstream.

I brought this up on that Ransom guy's blog last time you brought him up here but Brian Caplan made the observation that Hayekians attribute to Hayek a lot of "the sky is blue" statements. That is, if Hayek said it then it is a Hayekian idea regardless of where else it might have come from or if its original or whatever.

Sort of but not. Capitalism and Freedom has a far greater positive agenda; as in this what I would like to see happen. TRTS is much more negative in what it contemplates - this is what we shouldn't do. Hayek to me was always more circumspect in what he would recommend in the way of changes to the current order; Friedman was always more willing to say this needs to be junked and that too and this needs to be implemented. It is to me the primary difference between the men.

As hilariously cruel as the man could be, Galileo often made a point (especially in his Dialogue Concerning the Two Chief World Systems) of stating that great thinkers from the past - for him, this especially meant Aristotle and Copernicus - would have rationally incorporated new information about the world, either from more rigorously reasoned physical experiments (in Aristotle's case) and from telescope observations (which would have vindicated many of Copernicus' originally absurd-seeming statements of fact about the look of things in the heavens).

It is not just touching to see somebody from the 17th century sharing the same feeling any student gets when they wonder how wonderful it would have been for the early builders (the "giants" with broad shoulders, in the also famously vindictive classic phrase from Newton) to see what they had helped discover, and wanted desperately to see.

Is it probable that many great thinkers from the past would be involved in fruitless quibbles and strange contradictions? Surely so. Yet it is also probable that many of them would indeed be able to hang with the big dogs of modern thought.

In light of this, it seems an especially egregious error to continually insist on bashing great thinkers - our intellectual betters from the past - simply because they're from the "wrong team." If people like Galileo and Newton could hold out olive branches to their friends, surely we can contemplate what it means to truly hold in appropriate reverence, if no esteem, those now-silent voices we find fault with from our perch in modern times.

In terms of this exact "debate" between Hayek and Keynes, the "in the long run" quote seems especially appropriate here. You can't rub out complexity, but sometimes you just need to act - as we desperately need to do now. And, in the case of Krugman, I'm willing to give him a bye in using all the reasonable polemics at hand in order to fight corrosive, untimely nonsense.

I must admit i'm a little confused that so many austrians are butthurt about the statement that Hayek is irrelevant to modern macro considering almost all of them believe macro is largely garbage. Hayek certainly thought so and it's not as if the field has undergone any kind of fundamental shift since his death.

I suppose they're reacting more to Krugman's snide tone than anything else, spurred on by the fact that Krugman has provided them with an open goal in overstating his case. If he had just said something like "Keynes' influence on modern macro dwarfs Hayek's" there wouldnt be much to quibble with. But Krugman being Krugman his contempt drives him into making a much stronger claim: that hayek's input is essentially nil.

That claim is easy to refute and theyve succeeded in doing it imo. Your attempt to dig Krugman out of his hole by depicting them as claiming elementary economic insights owe to Hayek isnt very fair, and even if it were there is a difference between originality and influence. No-one would deny Keynes' influence even though he himself dedicated a chapter in the general theory to pointing out that his ideas didn't represent much more than a kind of stuffed crust mercantilism.